Discount Rate Calculation Overview - Prior to 7th Report and Order

1/5/2009

One of the first and most influential steps to determine the amount of funding an applicant may receive is a calculation of the applicant’s site specific and shared discount rates. There are a few directions from which to approach this process, and it is crucial for applicants to understand how they may calculate their discounts in an appropriate and acceptable manner in order to obtain the most accurate funding rates. Inaccurate calculations that result in reporting a funding rate even one percent too low can cost applicants thousands of dollars.

Generally an applicant site’s discount rate is based on the number of students at that facility which qualify for the National School Lunch Program (NSLP) free or reduced price lunches. Students whose families have a household income of that is within 185% of the federal poverty guidelines are considered eligible for the NSLP program. Different discount rates apply to facilities that are located in urban or rural areas (rural areas in general have higher costs associated with E-rate eligible services). See the discount matrix provided below to determine funding rates.

E-rate Discount Matrix

Portion of Students Eligible for NSLP

Urban Discount Rate

Rural Discount Rate

Less than 1%

20%

25%

1% - 19%

40%

50%

20% - 34%

50%

60%

35% - 49%

60%

70%

50% - 74%

80%

80%

75% - 100%

90%

90%

If an applicant school is five students short of reaching 75% of their students being eligible for NSLP the school is not without means to improve their discount rating to the 90% mark. A school can work to identify additional families that are eligible to participate in the NSLP. In addition to the primary measure of NSLP eligibility, the Schools and Libraries Division (SLD) has identified several alternative methods for determining discount rates.

Alternative methods can be based on the same poverty measure that the NSLP uses – a household income at or below 185% of the federal poverty guidelines. Other measures that do not exceed this measure of poverty are also acceptable, such as participation in Medicaid or food stamp programs. Data may be collected through existing sources or by means of a survey. A survey meets the program guidelines if the survey is sent to all the families whose children are students of a school, has at least a 50% response rate and assures confidentiality. At a minimum the survey must request the family address, student grade level, family size, and parent’s income level. As long as at least 50% of the families in the school respond to the survey, the school may project the eligibility of the respondent families to the whole school.

Schools may also use sibling match methods to determine NSLP eligibility. In short, if a student has another family member that is eligible for NSLP, then all the students in that family are eligible. For example, if a high school determines that a student’s elementary age sibling is eligible, then they have established that the high school student is eligible for NSLP as well.

Once individual school sites have determined their discount rates, the school district may calculate its shared rate based a weighted average of the individual school site rates. This district wide rate is used to determine the funding rate of district wide services (i.e. internet access).

Libraries base their discount rates on the corresponding discount rate of the school district in which the library is located. Accordingly, library systems determine their shared discount percentages based on the average of the funding rates of their library branches.

Non-instructional facilities for school and library applicants have been eligible for E-rate funding for priority one services since the 2004 funding year. Non-instructional facilities base their discount rates on the shared discount rate of their district.